TaxTMI 
TaxTMI 
2020 (10) TMI 1200
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.... That the Ld. CIT (A) has erred in law and on facts by allowing relief of Rs. 30,04,822/- on account of Foreign Traveling expenses without appreciating the facts mentioned elaborately in the assessment order that the travel was not undertaken by the employees of the company and that the expenses related to finding business for the holding company and not for the assessee company. (iii) That the Ld. CIT(A) has erred in law and on facts by allowing relief of Rs. 1,11,15,572/- on account of legal & Professional expenses without appreciating the facts mentioned elaborately in the assessment order and ignoring that there was no company that was merged or acquired by the assessee company, hence expenses were made for holding company and not allowable. (iv) That the Ld. CIT (A) has erred in law and on facts by allowing relief of Rs. 2,89,59,306 /- on account of addition made by the Assessing Officer relying the order of TPO u/s 92CA(3) without appreciating the facts mentioned elaborately in the assessment order. (v) On fact and circumstances of the case and in law, Ld. CIT(A) violated provisions of Rule 46A by not giving opportunity to the AO/TPO. (vi) ....
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....rofit in respect of domestic sales and export sales even if segmental accounts are available. 8. After considering the facts and submissions, the CIT(A) found that u/s 10A(4) of the Act, a formula has been given, wherein the profits derived from export of articles or things or computer software shall be the amount which bears to the profits of the business of the undertaking the same proportion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business carried on by the undertaking. 9. After analysing the formula given the CIT(A) observed that : "if we go with the reasoning of the Assessing Officer, then in the case of loss in domestic sales and profit in export sales on the basis of segmental account of the undertaking, then loss of the domestic sales need to be carried further and 100% deduction on profit of the export sales to be allowed which is not as per the provisions of the Act". 10. The CIT(A) accordingly allowed the appeal of the assessee and directed the Assessing Officer to allow the deduction u/s 10A of the Act. 11. Before us the ld. DR strongly supported the findings of the Assessi....
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....Officer to delete the disallowance. 18. Before us, the ld. DR strongly supported the findings of the Assessing Officer. 19. Per contra, the learned counsel for the assessee reiterated what has been stated before the lower authorities. 20. We have carefully perused the orders of the authorities below. We find that the foreign travel expenses related to employees of the appellant company, which include CFO, CEO, CCEs Head Technology, team leaders and Manager, Business development and places visited like USA, UK and Thailand for the purposes of business development, business meetings, for attending seminars and training. 21. In our considered opinion, as the company is in export of call centre services, setting up a successful international call centre requires up-to-date technology, quality assurance, data analysis and continuous training of employees, international level of communication, skills, continuous business development and for this purpose, the top management and the other related employees went abroad to gain knowledge of the call centres to have international standards. As mentioned elsewhere, this is the first year of the business. Therefore, it is more impor....
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....ement attached at Page No. 148 of Paper Book (PB)- I. Thus this expenditure is for development of business of the Company and not for merger or acquisition as such. As Colwell is engaged in the service sector i.e. providing Voice based BPO therefore the purpose of acquiring any business is to increase the client base and the company is not interested in setting up and infrastructure of the acquire company. As in service sector there is no big business set up or infrastructure but the client base which is important for any company who is acquiring the business. Thus the said expenditure is normal marketing business expenditure incurred for development of the business of the Company and allowable as such. The AO has fully verified this expenditure and the same is fully as per audited accounts but the AO has only issue regarding the nature of the same. 6,76,510 c. Colwell % Salmon Commuications Inc., USA These expenses are towards Deputation Charges of Brian W Smith who was acting as COO of the Company and looking after the operations of the Company and his recruitment charges. Please refer Page No. 151 to 153 of the Paper Book-I. These expenses are normal business expenses, ....
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....infrastructure of the acquiree company. As in service sector there is no big business set up or infrastructure but the client base which is important for any company who is acquiring the business. Thus the said expenditure is normal marketing business expenditure incurred for development of the business of the Company and allowable as such. The AO has fully verified this expenditure and the same is fully as per audited accounts but the AO has only issue regarding the nature of the same. 7,70,000 7.O.P. Kahaitan & Co., Delhi O.P. Kahaitan & Co. is a firm of Solicitors & Advocates and their services were hired by the assessee to finalise various agreements in UK in respect of services hired by the assessee of various consultants and agreements with customers of the company. Please refer Page No. 177 of Paper Book-I 5,27,540 8. The 1 Group Pic, UK Professional charges for UK office set up & other services and during the year the assessee set up a Branch in UK, copy of the Proof of the same is in Paper Book. The same is normal business expenditure and allowable as such. 19,42,473 9. Trendsetter Computer Software Pvt Ltd, Delhi The assessee engaged Trendsetter....
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....party. Secondly, the assessee justified its international transaction to be at ALP on the basis of under-utilisation of the capacity and further justified with internal comparables. Though the CIT(A) considered the submissions made by the assessee, but finally adjudicated upon under-utilisation of capacity. 32. While coming to his conclusion, the CIT(A) forwarded the reply of the assessee to the Assessing Officer and the Assessing Officer was asked to file his reply on the submissions made by the assessee in the paper book. 33. We find that multiple opportunities were given by the CIT(A) but in spite of more than sufficient time, no response was received from the Assessing Officer. As mentioned elsewhere, the CITA finally adjudicated on the alternative TP study relating to adjustment of unutilised capacity and allowed the appeal of the assessee. 34. Before us, in addition to supporting the findings of the TPO/Assessing Officer, the DR has also filed written submissions which have been duly considered by us. 35. In the written submissions, the ld. DR mainly addressed to the selection of the tested party. It has been contended by the revenue that the FAR analysis mentione....
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....and, the net profit margin of the comparable cases who are already into business from past many years unutilised capacity can be understood from the following chart: Particulars Year Ended March 31, 2004 Export Sales Domestic Sales Unutilized Total CSU Others Sales / Operating Income 461.92 32.62 168.30 662.84 Personnel Expenses 147.12 35.50 126.50 164.22 473.35 Commission on Exports - 0.37 - 0.37 Lead List Data - 7.47 - 7.47 Exchange Rate Fluctuation 7.49 (0.23) - 7.26 Other Opera/and Administrative expenses 260.78 62.93 20.90 291.10 635.71 TOTAL COST 415.40 106.03 147.40 459.40 1128.23 OPERATING PROFIT BEFORE INTEREST 46.51 (73*41) 20.91 (459.40) (465.39) ....